JD Wetherspoon sees lower FY trading after wages hike

Low-price pub chain JD Wetherspoon said it saw lower full year results as it upped wages without recovering the cost through higher prices.

"It is difficult to be too precise at this early stage of the current financial year, but we now expect a trading outcome slightly below that achieved in the previous financial year,” said outspoken chairman Tim Martin.

In a trading update, Martin, recovering from a burst appendix, encapsulated current trading in two sentences and then vented his spleen with his usual attack on the EU, citing William Shakespear and former Australian prime minister Tony Abbot to support his case for a hard Brexit.

On the financial front, Wetherspoons reported a 5.5% rise in first quarter like-for-like sales, with total sales up by 6.2%.

The company said its had opened two new pubs since the start of the financial year and has closed or sold three. edIt intend to open between five and 10 in the current financial year, Martin said.

"As has been widely reported, unemployment is at a record low, putting upward pressure on wages. As a result, Wetherspoon is increasing pay of our staff starting from this week,” he said.

"Having had several recent years of record profits, we are not immediately seeking to recoup these increased costs through higher pricing or 'mitigation', but will review that during the year.”

Analysts at Liberum rated the stock a 'hold', adding that Wetherspoons was "one of the most exposed leisure companies to wage inflation" with staff costs 32.6% of revenue.

"JDW's margins are the lowest in the sector, buts its like-for-like run rate is one of the highest, which combined with the freehold reversions, disposals and share buy backs has helped to drive adjusted earning per share growth in the past," Liberum said.

"We remain concerned about the company's ability to keep up this momentum (particularly in a higher interest rate and labour cost environment)."